As we can see, pricing strategies is now clustered around the optimal price point.

But wait, we’re not finished

Adversarial pricing

One common problem with this approach is price-related adverse selection - that the price at which an applicant is willing to buy your product is correlated with losses. For example, a low-risk customer may purchase from a competitor offering low rates, leaving you with the subset of customers that were denied from most other providers

Here, we change the framework to incorporate price-related adverse selection by having expected losses increase as price increases: